Inkscape is a great free program for creating vectors (scalable graphics that won't blur when you resize them). It's so good, in fact, that it's a serious alternative to premium tools like Adobe Illustrator.
Free vector illustration software Inkscape is compatible with SVG format, but can also important EPS, PostScript, JPG, PNG, BMP or TIP images and export PNG or other vector-based formats.
Inkscape provides several tools and various shapes, paths, text, markers, clones, transparency effects (alpha), transformations, gradients, patterns and groups.
Inkscape also supports Creative Commons metadata, node editing, layers, complex path operations, bitmap tracing, path-based texts, circumfluent object text, direct XML editing and much more.
Simply put, if you can do it in Adobe Illustrator, chances are you can do it in Inkscape, and that's pretty incredible for a piece of free vector software. If nothing else, give it a try to see how you find it; if it's not for you, you haven't lost a thing.
You can manipulate image shapes, fill them with gradients, apply filters, group them with other layers, convert them to paths, distort them and so much more.
There's not enough space to list everything that Inkscape can do, which just attests to how powerful it is.